Greensill facing $58m CGT bill after Federal Court loss

A Federal Court ruling that has added a $58m CGT bill to Lex Greensill’s woes could also set a worrying precedent for other wealthy expats.

Lex Greensill in London last year. Picture: Annabel Moeller

A full sitting of Federal Court has added to Lex Greensill’s woes after finding 3-0 against the Bundaberg business baron’s attempts to avoid paying tax on $58m of capital gains.

The landmark ruling also poses significant issues for non-resident beneficiaries of trusts, leaving them open to capital gains tax on distributions made to non-residents, even if those gains related to assets which were not considered taxable Australian property.

The Federal court slapped down attempts by lawyers acting for the Greensill family trust and a second trust unrelated to Greensill, the Martin family trust, which had argued for similar treatment in tax matters.

The two trusts had been seeking to challenge rulings from the Australian Taxation Office, which had ordered they pay tax on capital gains.

This followed an earlier unfavourable ruling against the Greensill trust in April last year.

The full bench of the federal court found lawyers acting for the Greensill family trust had no leg to stand on in their argument that tax need not be paid on the capital gains paid to Mr Greensill given he was a foreign beneficiary.

The ruling also poses significant issues for non-resident beneficiaries of trusts, leaving them open to capital gains tax on distributions to non residents, even if those gains related to assets which were not taxable Australian property.

Almost $33m of the income in question in the case arose from shares in Greensill Capital held by the trust sold between 2015 and 2017.

The gains from the sale were paid to Mr Greensill, on top of another $25m in stock that was transferred to him.

At the time Mr Greensill had suggested the $25m in shares were intended to be gifted to employees.

However, that stock is now worthless after the spectacular implosion of the business empire in March.

Greensill Capital’s former office in London. Source:Annabel Moeller

In a statement the ATO said it welcomed the decision of the court.

“The Court’s judgment clarifies issues around capital gains assessed to the trustee of a resident trust, where the trustee makes a non-resident beneficiary entitled to these gains,” it said.

The judges ordered the Greensill trust to pay costs for its failed efforts.

The finding of the federal court leaves the Greensill trust and Mr Greensill with two options, either to appeal the decision to the High Court, or pay the tax.

The Rich Lister, who recently dropped $3.5m on renovations to his three-storey house in Saughall, a small village in the English countryside, now faces further challenges to his income stream.

The 5-0 defeat of the Greensill family’s battle that has raged in the courts since 2019 comes in the wake of the shock destruction of Greensill after demands from Credit Suisse for early repayments of loans extended to the business.

The court’s decision also threatens future payments to Mr Greensill from the family trust, which controls much of the family’s farming interests in Queensland.

Greensill Capital was at the same time grappling with a last minute court challenge to force IAG to renew its policies, arguing there would be catastrophic consequences if policies were to expire.

Greensill Farming Group announce the start of construction for Green Solutions Wide Bay with the official 'ground-breaking' of the site.

The family trust has been intimately captured in the collapse of Greensill Capital, seeking along with several other creditors to get a slice of the assets of the business empire as administrators carve it up.

Court documents reveal Greensill Capital had received a $US60m in loans from the family trust in October 2020, guaranteed by the UK business.

The Greensill family trust is also deeply wrapped up in the family’s farming businesses around Bundaberg in Central Queensland.

Until December 2014 Greensill Farming was owned by the Australian parent company, Greensill Capital before being transferred to the trust.

The trust holding of the farming business has kept it out of the whirlwind wind-up that has claimed Greensill’s entities.

The farming company, as a trustee, has shelled out almost $70m since 2016 snapping up farms around Bundaberg.